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Scorpio Bulkers Inc. Announces Financial Results For The First Quarter Of 2016

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Of the $40.1 million in agreed upon prepayments, $27.6 million was paid in the first quarter of 2016.

$27.3 Million Credit Facility

During the first quarter of 2016, $23.3 million was drawn down on this facility to finance the delivery of two Ultramax vessels delivered from Imabari Shipbuilding Co. Ltd. This facility will mature in February 2021. The terms and conditions of this facility, including covenants, are similar to those in the Company's existing credit facilities and customary for facilities of this type.

In February 2016, the Company reached an agreement in principle with the lender to add four quarterly installment payments to the balloon payment in exchange for an advance principal repayment of approximately $1.6 million. As a result of this agreement, the Company will not have to make the next eight quarterly installment payments totaling $3.1 million. The agreement was executed in April 2016 at which time we made the prepayment.

$411.3 Million Credit Facility

As of December 31, 2015, the three Capesize vessels collateralizing this facility were classified as held for sale. Upon completion of the sale of these vessels in January 2016, the loan was fully repaid and the remaining total commitments have been canceled.

$42 Million Credit Facility

On February 15, 2016, the Company signed an amendment with a leading European financial institution for a $10.9 million upsize to its original $42 million senior secured credit facility. The proceeds of the upsized commitment financed a portion of the purchase price of one Ultramax vessel that was delivered to the Company in Q3 2015 from Imabari Shipbuilding Co. Ltd. On February 17, 2016, the Company drew down $10.9 million on this facility. Upon draw down we simultaneously prepaid the first four quarterly repayments and will not have to make the next eight quarterly repayments as mentioned below. This facility will mature in September 2021. The terms and conditions of this facility, including covenants, are similar to those in the Company's existing credit facilities and customary for facilities of this type.

In February 2016, the Company reached an agreement with the lender to add four quarterly installment payments to the balloon payment in exchange for an advance principal repayment of approximately $3.2 million. As a result of this agreement, the Company will not have to make the next eight quarterly installment payments totaling $6.5 million.

$39.6 Million Credit Facility

In March 2016, the Company reached an agreement with the lender to add four quarterly installment payments to the balloon payment in exchange for an advance principal repayment of approximately $2.8 million. As a result of this agreement, the Company will not have to make the next eight quarterly installment payments totaling $4.7 million.

$409.0 Million Credit Facility

During the first quarter of 2016, $33.3 million was drawn down on this facility to finance the delivery of two Kamsarmax vessels delivered from Jiangsu Yangzijiang Shipbuilding Co., Ltd. and Hudong-Zhonghua (Group) Co., Ltd. Upon draw down we simultaneously prepaid the first four quarterly repayments and will not have to make the next eight quarterly repayments as mentioned below. This facility will mature in December 2020. The terms and conditions of this facility, including covenants, are similar to those in the Company's existing credit facilities and customary for facilities of this type.

In February 2016, the Company reached an agreement in principle with the lender to add four quarterly installment payments to the balloon payment in exchange for an advance principal repayment of approximately $14.5 million (calculated on the basis of loan amounts available for undelivered ships and adjusted for the recent cancellation of a shipbuilding contract as announced on April 3, 2016). As a result of this agreement, the Company will not have to make the next eight quarterly installment payments totaling $29.1 million (calculated on the basis of loan amounts available for the undelivered ships and adjusted for the recent cancellation of a shipbuilding contract as announced on April 3, 2016). $7.9 million of the prepayment was made in the first quarter of 2016. The agreement was executed in April 2016.

In April 2016, $12.8 million was drawn down on this facility to finance the delivery of an Ultramax vessel delivered from Mitsui Engineering & Shipbuilding Co., Ltd. Upon draw down we simultaneously prepaid the first four quarterly repayments and will not have to make the next eight quarterly repayments as mentioned above.

$330.0 Million Credit Facility

During the first quarter of 2016, $27.1 million was drawn down on this facility to finance the delivery of one Kamsarmax vessel delivered from Hudong-Zhonghua (Group) Co., Ltd. and one Ultramax vessel delivered from Chengxi Shipyard Co. Ltd. This facility will mature in July 2021. The terms and conditions of this facility, including covenants, are similar to those in the Company's existing credit facilities and customary for facilities of this type.

In March 2016, the Company reached an agreement with the lender to not make $13.8 million of the next four quarterly installment payments in exchange for an advance principal repayment of approximately $13.8 million. In addition, the lenders also agreed to extend the availability period of the credit facility to June 30, 2017 (from December 31, 2016) in order to accommodate delivery delays of certain vessels as described above in this press release.

$67.5 Million Credit Facility

During the first quarter of 2016, $12.3 million was drawn down on this facility to finance the delivery of one Ultramax vessel delivered from Chengxi Shipyard Co. Ltd. Upon draw down we simultaneously prepaid the first three quarterly repayments. This facility will mature the date falling 7 years after the drawdown date applicable to the fourth financed vessel and, if earlier, December 2023. The terms and conditions of this facility, including covenants, are similar to those in the Company's existing credit facilities and customary for facilities of this type.

In February 2016, the Company reached an agreement in principle with the lender to add four quarterly installment payments to the balloon payment in exchange for an advance principal repayment of approximately $4.3 million (calculated on the basis of loan amount available for the undelivered ship). As a result of this agreement, the Company will not have to make the next eight quarterly installment payments totaling $8.7 million (calculated on the basis of loan amount available for the undelivered ship). The agreement was executed in April 2016 at which time we made a prepayment of $3.2 million.

We made the following drawdowns from our credit facilities during the three months ended March 31, 2016:

Credit facility

Drawdown amount

($ thousands)

Collateral

1

$27.3 Million Credit Facility

$

11,750

SBI Achilles

2

$330 Million Credit Facility

14,175

SBI Lambada

3

$330 Million Credit Facility

12,900

SBI Hercules

4

$409 Million Credit Facility

16,122

SBI Rock

5

$409 Million Credit Facility

17,221

SBI Reggae

6

$27.3 Million Credit Facility

11,500

SBI Hermes

7

$67.5 Million Credit Facility

12,300

SBI Perseus

8

$42 Million Credit Facility

10,875

SBI Tango

As of April 29, 2016, the Company had $209.2 million in cash and cash equivalents. As of April 29, 2016, the Company's outstanding debt balance, and amount available to draw is as follows (dollars in thousands):

As of March 31, 2016

As of April 29, 2016

Credit facility

Amount outstanding

Amount outstanding

Amount available *

Senior Notes

$

73,625

$

73,625

$

-

$39.6 Million Credit Facility

22,538

22,538

-

$409 Million Credit Facility

106,476

118,376

86,850

$330 Million Credit Facility

186,984

186,984

105,000

$42 Million Credit Facility

44,290

44,290

-

$67.5 Million Credit Facility

41,307

38,144

16,350

$12.5 Million Credit Facility

11,554

11,554

-

$27.3 Million Credit Facility

23,250

21,700

-

Total

$

510,024

$

517,211

$

208,200

*

Reflects the maximum loan amount available on undrawn vessels.

Newbuilding Program

Our Newbuilding Program consists of contracts for the construction of 48 dry bulk vessels, comprised of 28 Ultramax newbuildings, and 20 Kamsarmax newbuildings. Of this total, through April 29, 2016, we have taken delivery of 14 Kamsarmax vessels and 20 Ultramax vessels. The aggregate construction price for the remaining 14 dry bulk vessels is $406.6 million. Of this amount, $256.9 million remains unpaid as of April 29, 2016 and is scheduled to be paid in installments through the delivery dates of each vessel. The estimated future payment dates, which reflect the agreements in principle described above with certain shipyards in China to delay the scheduled delivery of eight vessels, and amounts are as follows (dollars in millions) (1):

Q2 2016

$

75.1

(2)

Q3 2016

41.3

Q4 2016

98.3

Q1 2017

21.1

Q2 2017

21.1

$

256.9

(1)

These are estimates only and are subject to change as construction progresses.

(2)

Relates to payments expected to be made from April 29, 2016 to June 30, 2016. This excludes $19.7 million paid from April 1, 2016 to April 29, 2016.

Explanation of Components of Financial Results for the three months ended March 31, 2016 and 2015

The Company had a GAAP net loss of $58.3 million, or $1.96 loss per diluted share for the first quarter of 2016 compared with a GAAP net loss of $52.1 million, or $3.60 loss per diluted share for the first quarter of 2015. Excluding a loss/write off of vessels and assets held for sale of $12.4 million, a write off of deferred financing costs on credit facilities that will no longer be used of $2.5 million and a charterhire contract termination fee of $10.0 million adjusted net loss for the first quarter of 2016, was $33.4 million, or $1.12 adjusted loss per diluted share. Excluding a write down of assets held for sale of $31.8 million and the write off of deferred financing costs on credit facilities that will no longer be used of $3.5 million adjusted net income for the first quarter of 2015, was $16.8 million or $1.16 adjusted loss per diluted share (see Non-GAAP Financial Measures below).

Time charter equivalent, or TCE revenue, a Non-GAAP financial measure, is vessel revenues less voyage expenses (including bunkers, port charges, broker fees and other miscellaneous expenses that we are unable to recoup under time charter and pool arrangements). TCE revenue is included herein because it is a standard shipping industry performance measure used primarily to compare period-to-period changes in a shipping company's performance irrespective of changes in the mix of charter types (i.e., spot charters, time charters, and pool charters), and it provides useful information to investors and management.

TCE revenue was $10.2 million for the first quarter of 2016 and is associated with a day weighted average of seven vessels time chartered-in and 31 owned vessels, comprised of 13 Kamsarmax vessels and 18 Ultramax vessels compared to TCE revenue of $12.3 million during the first quarter of 2015, associated with chartering in a day weighted average of 15 vessels and six vessels owned. (See the Company's Fleet List below for the complete list of our vessels owned.) TCE revenue per day was $3,404 and $6,652 for the first quarter of 2016 and 2015, respectively (see the breakdown of daily TCE averages below). The decrease in TCE revenue per day is due to the number of back hauls performed by our fleet during the period as well as a reduced rates resulting from the weakness in the dry bulk market, as reflected by the Baltic Dry Index ("BDI"). After falling to an all-time low of 290 in February of 2016, the BDI has rebounded slightly but remains at depressed levels. The decrease in the rates we earned outweighed the increase in revenue days associated with the increase in the average vessels operated causing total TCE revenue to decrease versus the prior year period.

Vessel operating costs for the first quarter of 2016 were $15.3 million related to 31 vessels owned on average during the period, including approximately $1.3 million of takeover costs associated with new deliveries. These takeover costs will decrease as our newbuildings are delivered. Vessel operating costs for the first quarter of 2015 were $2.8 million related to six vessels owned, on average, during the related period.

Charterhire expense was $8.5 million and $16.0 million for the first quarter of 2016 and 2015, respectively, reflecting the reduction in the number of vessels time chartered-in. Charterhire expense is expected to drop to approximately $3.6 million in the second quarter of 2016 and then to approximately $2.7 million per quarter for the remainder of the year. During the quarter we also recorded a $10.0 million charge to terminate four time charter-in contracts. Termination of these contracts reduces our future cash outflow by approximately $10.3 million net of the termination fee and will also have a positive impact on our future operating results as the contracts were at above current market rates. See the Company's Fleet List below for the terms of these agreements.

Depreciation for the first quarters of 2016 and 2015 was $7.3 million and $1.6 million, respectively and relates to 31 and six vessels owned, respectively, on a weighted average basis, during the periods.

General and administrative expense was $7.8 million and $8.5 million for the first quarter of 2016 and 2015, respectively and included $4.5 million and $6.1 million of restricted stock amortization. The decrease in restricted stock amortization is due to the reversal of expense related to forfeited awards and new grants having a lower grant date fair value than those that are running off due to being fully expensed. This decrease was partially offset by an increase in commercial management fees, due to the increase in the size of our fleet, employee separation costs, and an increase in directors' fees due to two additional independent directors, as well as an increase in the number of board of director and committee meetings.

During the first quarter of 2016, the Company recorded a loss/write off of vessels and assets held for sale of $12.4 million of which $11.6 million related to the cancellation of a shipbuilding contract for a Kamsarmax bulk carrier that was expected to be delivered in April 2016 and $0.8 million in additional expenses related to vessels held for sale at December 31, 2015. The loss recorded in the prior year period was associated with writing down four contracts to construct vessels that were classified as held for sale. These four contracts to construct vessels include one Kamsarmax construction contract and three contracts for construction of LR1 product tankers.

In the first quarters of 2016 and 2015, we wrote off $2.5 million and $3.5 million, respectively, of deferred financing costs accumulated on credit facilities for which the commitments were reduced pursuant to the removal from the facilities of certain vessels that have been sold or classified as held for sale.

Scorpio Bulkers Inc. and Subsidiaries

Consolidated Statements of Operations

(unaudited)

(Dollars in thousands, except per share data)

Three months ended March 31,

2016

2015

Revenue:

Vessel revenue

$

10,244

$

12,270

Operating expenses:

Voyage expenses

65

-

Vessel operating costs

15,315

2,846

Charterhire expense

8,544

16,023

Charterhire contract termination charge

10,000

-

Vessel depreciation

7,292

1,567

General and administrative expenses

7,787

8,481

Loss/write off of vessels and assets held for sale

12,433

31,752

Total operating expenses

61,436

60,669

Operating loss

(51,192

)

(48,399

)

Other (expense) income:

Interest income

93

68

Foreign exchange (loss) gain

(118

)

69

Financial expense, net

(7,043

)

(3,803

)

Total other (expense) income

(7,068

)

(3,666

)

Net loss

$

(58,260

)

$

(52,065

)

Loss per common share- basic and diluted (1)

$

(1.96

)

$

(3.60

)

Weighted-average shares outstanding- basic and diluted (1)

29,794,055

14,454,515

(1)

Diluted weighted average shares outstanding excludes the impact of restricted shares for the three months and years ended March 31, 2016 and 2015, as the impact would be anti-dilutive since the company is in a net loss position.

Scorpio Bulkers Inc. and Subsidiaries

Consolidated Balance Sheets (unaudited)

(Dollars in thousands, except per share data)

March 31,

December 31,

2016

2015

Assets

Current assets

Cash and cash equivalents

$

230,185

$

200,300

Due from charterers

10,064

8,197

Prepaid expenses and other current assets

5,903

11,247

Assets held for sale

-

172,888

Total current assets

246,152

392,632

Non-current assets

Vessels, net

977,525

764,454

Vessels under construction

205,729

288,282

Deferred financing costs, net

15,896

12,807

Other assets

21,566

27,261

Total non-current assets

1,220,716

1,092,804

Total assets

$

1,466,868

$

1,485,436

Liabilities and shareholders' equity

Current liabilities

Bank loans

$

25,281

$

110,226

Accounts payable and accrued expenses

15,312

16,838

Total current liabilities

40,593

127,064

Non-current liabilities

Bank loans

411,119

350,216

Senior Notes

73,625

73,625

Total non-current liabilities

484,744

423,841

Total liabilities

525,337

550,905

Shareholders' equity

Common stock, $0.01 par value per share; authorized 56,250,000 shares; issued and outstanding 49,717,863 and 28,686,561 shares as of March 31, 2016 and December 31, 2015, respectively

497

287

Paid-in capital

1,632,955

1,567,905

Accumulated deficit

(691,921

)

(633,661

)

Total shareholders' equity

941,531

934,531

Total liabilities and shareholders' equity

$

1,466,868

$

1,485,436

Scorpio Bulkers Inc. and Subsidiaries

Statements of Cash Flows (unaudited)

(Dollars in thousands)

For the three months ended March 31,

2016

2015

Operating activities

Net loss

$

(58,260

)

$

(52,065

)

Adjustment to reconcile net loss to net cash used by operating activities:

Restricted stock amortization

4,514

6,064

Vessel depreciation

7,292

1,567

Amortization of deferred financing costs

834

228

Write off of deferred financing costs

2,456

3,530

Loss/write off of vessels and assets held for sale

10,555

31,752

Changes in operating assets and liabilities:

Decrease in amounts due from charterers

(2,599

)

1,433

Increase in prepaid expenses and other current assets

4,500

1,156

Increase in accounts payable and accrued expenses

3,186

(4,169

)

Net cash used in operating activities

(27,523

)

(10,504

)

Investing activities

Proceeds from sale of assets held for sale

269,376

-

Payments on assets held for sale

(98,445

)

(19,756

)

Payments for vessels and vessels under construction

(148,365

)

(188,343

)

Net cash provided by (used in) investing activities

22,566

(208,099

)

Financing activities

Proceeds from issuance of common stock

60,703

(239

)

Proceeds from issuance of long-term debt

106,843

106,388

Repayments of long-term debt

(130,885

)

(917

)

Debt issue costs paid

(1,819

)

(12,340

)

Net cash provided by financing activities

34,842

92,892

Increase (decrease) in cash and cash equivalents

29,885

(125,711

)

Cash at cash equivalents, beginning of period

200,300

272,673

Cash and cash equivalents, end of period

$

230,185

$

146,962

Scorpio Bulkers Inc. and Subsidiaries

Other Operating Data (unaudited)

(Dollars in thousands)

For the three months ended March 31,

2016

2015

Time charter equivalent revenue (1):

Vessel revenue

$

10,244

$

12,270

Voyage expenses

(65

)

-

Time charter equivalent revenue

$

10,179

$

12,270

Time charter equivalent revenue attributable to:

Kamsarmax

$

4,360

$

7,128

Ultramax

5,819

4,463

Capesize

-

679

$

10,179

$

12,270

Revenue days:

Kamsarmax

1,309

1,140

Ultramax

1,681

651

Capesize

-

54

Combined

2,990

1,845

TCE per revenue day (1):

Kamsarmax

$

3,331

$

6,252

Ultramax

$

3,462

$

6,855

Capesize

$

-

$

12,676

Combined

$

3,404

$

6,652

(1)

We define Time Charter Equivalent (TCE) revenue as voyage revenues less voyage expenses. Such TCE revenue, divided by the number of our available days during the period, or revenue days, is TCE per revenue day, which is consistent with industry standards. TCE per revenue day is a common shipping industry performance measure used primarily to compare daily earnings generated by vessels on time charters with daily earnings generated by vessels on voyage charters, because charter hire rates for vessels on voyage charters are generally not expressed in per-day amounts while charter hire rates for vessels on time charters generally are expressed in such amounts.

We report TCE revenue, a non-GAAP financial measure, because (i) we believe it provides additional meaningful information in conjunction with voyage revenues and voyage expenses, the most directly comparable U.S.-GAAP measure, (ii) it assists our management in making decisions regarding the deployment and use of our vessels and in evaluating their financial performance, (iii) it is a standard shipping industry performance measure used primarily to compare period-to-period changes in a shipping company's performance irrespective of changes in the mix of charter types (i.e., spot charters, time charters and bareboat charters) under which the vessels may be employed between the periods, and (iv) we believe that it presents useful information to investors.

(1) Expected delivery date relates to the quarter during which each vessel is currently expected to be delivered from the shipyard.

Time chartered-in vessels

The Company has time chartered-in three dry bulk vessels. The terms of the time charter-in contracts are summarized as follows:

Vessel Type

Year Built

DWT

Where Built

Daily Base Rate

Earliest Expiry

Kamsarmax

2012

82,000

South Korea

$

15,500

30-Jul-17

(1)

Panamax

2004

77,500

China

$

14,000

03-Jan-17

(2)

Supramax

2008

58,000

China

$

12,250

12-Jun-16

(3)

Total TC DWT

217,500

(1)

This vessel has been time chartered-in for 39 to 44 months at the Company's option at $15,500 per day. The Company has the option to extend this time charter for one year at $16,300 per day. The vessel was delivered on April 23, 2014.

(2)

This vessel has been time chartered-in for 32 to 38 months, with such term to be determined at the Company's option at $14,000 per day. The agreement also contains a profit and loss sharing provision whereby, commencing upon the termination of the time charter-in agreement, we split all of the vessel's profits and losses with the vessel's owner for a period of two years. The vessel was delivered on May 3, 2014.

(3)

This vessel has been time chartered-in for 21 to 25 months at the Company's option at $12,250 per day. The Company has the option to extend this time charter for one year at $13,000 per day. The vessel was delivered on September 13, 2014.

Conference Call Details:

Tuesday, May 03, 2016 at 10:00 AM, Eastern Standard Time and 4:00 PM Central European Time.

Participants should dial into the call 10 minutes before the scheduled time using the following numbers: 1 (888) 820-9415 (U.S.) or 1 (913) 312-0398 (International). The conference participant passcode is 6814522. The information provided on the teleconference is only accurate at the time of the conference call, and the Company will take no responsibility for providing updated information.

Slides and Audio Webcast:

There will also be a simultaneous live webcast over the internet, through the Scorpio Bulkers Inc. website www.scorpiobulkers.com. Participants to the live webcast should register on the website approximately 10 minutes prior to the start of the webcast.

www.scorpiobulkers.com, which is not a part of this press release." data-reactid="139">Scorpio Bulkers Inc. is a provider of marine transportation of dry bulk commodities. Scorpio Bulkers Inc. currently owns 34 vessels, consisting of 14 Kamsarmax vessels and 20 Ultramax vessels. The Company also time charters-in three dry bulk vessels (consisting of one Supramax, one Panamax and one Kamsarmax vessels) and has contracted for 14 dry bulk vessels consisting of six Kamsarmax and eight Ultramax), from shipyards in Japan and China. Upon final delivery of all of the vessels the owned fleet is expected to have a total carrying capacity of approximately 3.4 million deadweight tonnes. Additional information about the Company is available on the Company's website www.scorpiobulkers.com, which is not a part of this press release.

Non-GAAP Financial Measures

This press release describes adjusted net loss and related per share amounts, which is not a measure prepared in accordance with GAAP. We believe the non-GAAP financial measure presented in this press release provides investors with a means of evaluating and understanding how the Company's management evaluates the Company's operating performance. These non-GAAP financial measures should not be considered in isolation from, as substitutes for, or superior to financial measures prepared in accordance with GAAP.

Adjusted net loss

In thousands, except per share data

For the three months ended March 31,

2016

2015

Amount (unaudited)

Per share (unaudited)

Amount (unaudited)

Per share (unaudited)

Net loss

$

(58,260

)

$

(1.96

)

$

(52,065

)

$

(3.60

)

Adjustments:

Loss/write off of vessels and assets held for sale

12,433

0.42

31,752

2.20

Write down of deferred financing cost

2,456

0.08

3,530

0.24

Charterhire contract termination charge

10,000

0.34

-

-

Total adjustments

24,889

0.84

35,282

2.44

Adjusted net loss

$

(33,371

)

$

(1.12

)

$

(16,783

)

$

(1.16

)

Forward-Looking Statements

Matters discussed in this press release may constitute forward-looking statements. The Private Securities Litigation Reform Act of 1995 provides safe harbor protections for forward-looking statements in order to encourage companies to provide prospective information about their business. Forward-looking statements include statements concerning plans, objectives, goals, strategies, future events or performance, and underlying assumptions and other statements, which are other than statements of historical facts. The Company desires to take advantage of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and is including this cautionary statement in connection with this safe harbor legislation. The words "believe," "anticipate," "intend," "estimate," "forecast," "project," "plan," "potential," "may," "should," "expect," "pending" and similar expressions identify forward-looking statements.

The forward-looking statements in this press release are based upon various assumptions, many of which are based, in turn, upon further assumptions, including without limitation, our management's examination of historical operating trends, data contained in our records and other data available from third parties. Although we believe that these assumptions were reasonable when made, because these assumptions are inherently subject to significant uncertainties and contingencies which are difficult or impossible to predict and are beyond our control, we cannot assure you that we will achieve or accomplish these expectations, beliefs or projections.

In addition to these important factors, other important factors that, in our view, could cause actual results to differ materially from those discussed in the forward-looking statements include the failure of counterparties to fully perform their contracts with us, the strength of world economies and currencies, general market conditions, including fluctuations in charter rates and vessel values, changes in demand for dry bulk vessel capacity, changes in our operating expenses, including bunker prices, drydocking and insurance costs, the market for our vessels, availability of financing and refinancing, charter counterparty performance, ability to obtain financing and comply with covenants in such financing arrangements, changes in governmental rules and regulations or actions taken by regulatory authorities, potential liability from pending or future litigation, general domestic and international political conditions, potential disruption of shipping routes due to accidents or political events, vessels breakdowns and instances of off-hires and other factors. Please see our filings with the Securities and Exchange Commission for a more complete discussion of these and other risks and uncertainties.